Most global banks will get eight years under the new proposed Basel agreement. A longer time horizon for increasing capital requirements. The shift will result in a more modest hit to a nation's GDP. Here, most banks meet the standards and are ramping up to meet Dodd-Frank. More have included the various risk models into their own operations.
Most commentators see Basel as a duplication of Dodd-Frank, Its implementation is not expected to freeze, slow GDP growth. Here, I will continue to point to the various parts of risk, that some may miss, however, the global banking regulators are all on top of taming these big banks.
The Basel Committee issued a consultative paper that recommends trade exposures to a central counterparty (CCP) receive a two percent risk weight. The risk sensitive waterfall approach requires a capitalization according to a simple method consistently estimating risk arising from that fund's potential default.
A waterfall approach is generally based on a CCP's actual financial resources and hypothetical capital requirements. An impact study will be conducted.
Our Federal Reserve, Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) are seeking comment on a notice of proposed rulemaking that would amend the advanced approaches capital adequacy framework known as Basel II to be consistent with certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. More specifically, a banking organization operating under the advanced approaches standards would be required to meet, on an on-going basis, the higher of the generally applicable and the advanced approaches minimum risk-based capital standards.
US regulators are seeking comment on a notice of proposed rulemaking that would revise the market risk capital rules for banking organizations with significant trading activity.
The proposed rule would implement changes approved by the Basel Committee on Banking Supervision to its market risk framework. The Federal Reserve, OCC, and FDIC believe the proposed revisions would better capture positions for which the market risk capital rules are appropriate, reduce procyclicality in market risk capital requirements, enhance the rules’ sensitivity to risks that are not adequately captured by the current regulatory measurement methodologies, and increase market discipline through enhanced disclosures.
Background Basel Committee
The Basel Committee on Banking Supervision provides a forum for regular cooperation on banking supervisory matters. Its objective is to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide. It seeks to do so by exchanging information on national supervisory issues, approaches and techniques, with a view to promoting common understanding. At times, the Committee uses this common understanding to develop guidelines and supervisory standards in areas where they are considered desirable. In this regard, the Committee is best known for its international standards on capital adequacy; the Core Principles for Effective Banking Supervision; and the Concordat on cross-border banking supervision.
The Committee's members come from Argentina, Australia, Belgium, Brazil, Canada, China, France, Germany, Hong Kong SAR, India, Indonesia, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The present Chairman of the Committee is Mr Nout Wellink, President of the Netherlands Bank (source: Bank for International Settlements (BIS)).
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